HR[preneur] Episode 16: How to Prevent Nepotism in the Family Business

HRpreneur Episode 16

Hiring or promoting relatives can bring certain advantages. But the potential for favoritism toward a family member, whether real or perceived, can have a negative impact on morale. In this episode, we'll talk about how employers can help prevent nepotism in the workplace.

Episode Info

How to Prevent Nepotism in the Family Business (click to listen/download podcast)

Reference Shelf

Speaker Info

Kara Murray is the Vice President of Sales Operations for ADP's Small Business Client Channel. Kara has been with ADP for 9 years and has been in various sales and sales leadership positions while she has been with ADP. One of her primary goals is to educate our clients on the ever-changing HR landscape and how ADP can help them overcome everyday workplace challenges.

Kristin LaRosa is Senior Counsel for ADP's Small Business Services division. Prior to joining ADP, Kristin worked as an employment lawyer where she represented employers in litigation and provided legal advice and counseling on day-to-day employment and HR matters.

Meryl Gutterman is Counsel for ADP's Small Business Services division. Prior to joining ADP, Meryl worked as an attorney in private practice representing small businesses in employment-related matters.

Full Transcript

Kara Murray: Hiring or promoting relatives can provide certain advantages, but the potential for nepotism still exists. Whether favoritism towards a family member is real or perceived, it can definitely have a negative impact on morale. Today we're going to talk about how employers can help prevent nepotism in the workplace. I'm Kara Murray, and this is HR{preneur}, a podcast by ADP.

We know you work incredibly hard to support your employees and make your business a success. More than likely this means you wear lots of hats and one of those might be HR professional. We're here to help you get the insight you need in order to tackle day-to-day workplace issues. This week I'm joined by Kristin LaRosa and Meryl Gutterman, both work as council for ADP small business services.

I also would like to thank the ADP client appreciation program for sponsoring this episode. You can get free payroll by referring ADP and if you want to find out more, you can talk to your local ADP sales representative. All right. So it's not uncommon for small business owners to hire family members. Is this a bad thing?

Kristin LaRosa: So I think for a family-owned business, hiring relatives makes a lot of sense and to your point, it's fairly typical. You already know the person and there's a certain level of trust there ideally. But employing family members can be a problem when non-relative employees feel that unfair favoritism is taking place. For example, if a relative is hired over a more qualified non-relative.

Kara: Got it. So if favoritism were to take place, that would be considered nepotism, correct?

Kristin: Yeah, that's right. So nepotism is when someone gets a job or a promotion or some other type of preferential treatment just because they're a relative. So this would include things like giving the relative preferred work assignments, overlooking performance issues, or any other favorable employment decision that's based on the fact that the employee is a family member.

Kara: But what if the relative is the more qualified candidate?

Meryl: Well, even if the family member is the most qualified for the job, non-relative employees tend to believe that it was the relationship rather than the qualifications that got them the job.

Kara: That's tricky. How can family-run businesses prevent the perception of nepotism?

Meryl: Well, that's difficult to say exactly, but things like holding all employees accountable, measuring against the same performance standards and not making any exceptions. All of those practices can help eliminate this perception.

Kristin: And some employees actually prefer their family members to work for a different company but in the same industry in order to get the necessary experience before working for the family business. So this can help ensure the employee has the background required for the role and may help avoid any perceptions of nepotism.

Kara: Got it. Also working with family members could present its own set of challenges which could negatively impact the workplace. How should employers address things like workplace drama among family members?

Meryl: Right. I think family or not, issues do occur from time-to-time so just like any conduct rule that you have, employers should clearly communicate expectations and then when there are conduct issues that arise, make sure that you're handling the situation promptly and fairly and consistently whether or not it involves a family member.

Kara: Would you recommend employers draft an anti-nepotism policy?

Kristin: I would recommend that they do. And especially if they plan to hire family members. And their policy should identify the companies' rules on hiring relatives. So in many cases, we see employers who prohibit their family members from working in the same chain of command. So that would be something you would include in the policy. And then this type of policy is really intended to prevent an individual from having control over their family member's employment, work responsibilities or compensation.

Meryl: Right. Employers should also specifically indicate that the employees can initiate or participate in any decisions that might involve a direct benefit to their relatives.

Kara: All right. And it might be obvious to some but who would be considered a family member?

Meryl: Well, most nepotism policies that we see define family members broadly. And that includes not only spouses but domestic partners, parents, children, siblings. And then other household members, sometimes grandchildren, great grandchildren, aunts, uncles, nieces, nephews. Sometimes even first and second cousins.

Kara: Okay. What is there is a family change that results in a conflict of interest like two employees who get married?

Kristin: So that's a great questions and I think you would probably be surprised at how frequently you see that in the workplace. But typically employees are required to report any changes in their personnel data so that would include a name change which can be the result of a marriage. And many employers also ask employees to disclose personal relationships that they have with a co-worker. So with notice, employers can work with the employees to help avoid any appearance of nepotism.

Kara: And so for this particular example, what options do employers have?

Meryl: Well, if the employees are in the same chain of command, one possibility would be to transfer supervisory responsibilities to another supervisor, but you have to make sure that you're making all of your transfers based on a non-discriminatory basis.

Kara: Okay. That's great advice. Now, besides a written policy, what other recommendations do you have to help prevent nepotism?

Meryl: I think it's important to review your hiring decisions carefully. So for example, if an employee recommends a family member for an open position, then you should direct them to apply using the company's standard procedures. And then you want to make sure that you're documenting the job-related reasons for hiring the individual for relatives and for all candidates applying for the position. And that way if your hiring decision is ever called into question you can support your choice by showing your decision was based on job-related factors only without regard to a family relationship.

Kristin: Absolutely. You also want to keep in mind that employee referrals should be just one part of a diversified recruiting effort. So exclusively relying on employee referrals may create a barrier to equal employment opportunity for groups that are not already represented in the employer's workforce.

Kara: All right. Do you guys have any additional advice for our listeners?

Kristin: Yeah, I would say that you want to lead by example. Like other company policies and anti-nepotism policy requires the support of top management in order for it to be effective. And management can help demonstrate their support by following the policy themselves and certainly staying out of employment decisions that may have an impact or affect their own relatives.

Meryl: Right. And also it's important to remember that employment decisions should be made on the basis of merit and drafting an effective anti-nepotism policy and enforcing it consistently is important and that will help you maintain a fair and equitable work environment.

Kara: Great. Well, as always, thank you so much Kristin and Meryl. We also want to thank you all for listening to HR{preneur}. I'm Kara Murray. For all the latest episodes, subscribe on Apple Podcast or whatever you listen to podcasts.

Podcast Overview

HR{preneur}, a podcast by ADP's Small Business Services, is designed to help you get the insight you need in order to tackle day-to-day workplace issues. In each episode, you'll hear from industry experts about the latest in HR, such as the #MeToo movement, evolving marijuana laws, and more. Each episode will be between 10 and 15 minutes long, but full of practical advice. Find us on Apple® Podcasts or visit the HR{preneur} podcast page on Podbean.